Buyer beware: Long-term care costs are surging

Long-term care costs are surging again and the most expensive option — a private nursing home room — may soon top $100,000 per year.

Growing labor expenses and sicker patients helped push the median cost of care that includes adult day care and assisted living communities up an average of 4.5 percent this year, according to a survey released Tuesday by Genworth Financial. That's the second-highest increase since Genworth started its survey in 2004.

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The cost of home health aide services climbed the most, rising 6 percent, to $21.50 an hour. Private nursing home care now costs more than $97,000 annually.

Many Americans don't plan for expenses like these or understand them until they face them, said Joe Caldwell of the National Council on Aging, which is not tied to Genworth's study.

"People don't like to think about it and talk about it ahead of time, so they kind of put off planning and saving for it financially because they don't think it's going to happen to them," he said.

Long-term care costs can impose a crushing financial burden on individuals or families in part because private health insurance and Medicare, the federal program for people over age 65, offer only limited help. That can force people who don't have private coverage to spend down their assets until they qualify for the government's health insurance program for the poor, Medicaid.

Genworth Financial Inc. sells long-term care coverage and didn't address that cost in its national study, which was based on information from 15,000 long-term care providers.

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Coverage costs are rising as well, Caldwell said, noting that few employers offer help with that expense like they do with retirement planning or more common forms of coverage such as health insurance.

Initial premiums for long-term care coverage can cost well over $2,000 annually, depending on the customer's age, according to the Bipartisan Policy Center, which researches health care issues.

A third of Americans 40 and older have done no planning for their long-term care needs, according to a 2016 Associated Press-NORC Center for Public Affairs Research survey.

Caldwell said many people don't realize the limits of Medicare coverage, and he expects the need for long-term care to soar.

"There is this aging baby-boom population that's going to be really hit hard in the coming decade," he said. "We need to figure it out."

For 2017, long-term care prices climbed in part because the cost of labor rose, according to Genworth. Care providers had to raise pay to compete for workers in a tight job market or comply with state requirements for minimum wages. Many also have started providing health insurance to their workers to comply with the Affordable Care Act. The federal law requires all companies with 50 or more full-time employees to offer coverage.

Genworth researchers say costs also are rising because care providers are working with patients that have more complex medical needs and live longer than they did a decade ago. Plus Medicaid offers reimbursement that can fall below the cost of care, which forces long-term care providers to make that up in their prices.

Genworth sees no sign that long-term care expenses are starting to slow, said David O'Leary, CEO of the company's U.S. life division.